By now, government price departments are well underway towards implementing the Final Average Manufacturer Price (AMP) Rule recently issued by the Center of Medicare and Medicaid Services (CMS). AMP is the average manufacturer price paid by retail community pharmacies (RCP). One of the key provisions of the sub-regulatory guidance is related to “5i” drugs (i.e., infused, injected, implanted, inhaled, or instilled drugs) that are drugs that are “not generally dispensed“ (NGD) in retail pharmacies but rather at infusion centers, specialty pharmacies, and so on. Even though 5i drugs are not sold into retail, they still require an AMP for other reasons including Medicaid rebates, 340B price calculations, and now pharmacy reimbursement for multi-source drugs. 5i drugs are treated differently from a calculation perspective, and therefore CMS has implemented a mathematically derived test.

As of the April 2016, CMS requires manufacturers to calculate the retail channel mix for each product strength combination (NDC9) on a monthly basis. If the calculation indicates that less than 30% of the sales are to retail community pharmacies, then the manufacturer can treat the NDC9 as 5i in their monthly AMP filing. CMS also provides manufacturers with the discretion to smooth the threshold calculation over a rolling 12-month period to reduce volatility in AMP prices.

Operationally 5i threshold presents several challenges that must be addressed quickly to meet the deadline and then implement on a going-forward basis. First, brand manufacturers do not contract with or sell directly to retail community pharmacies, which means that they have limited or no visibility into RCP sales transactions within their ex-factory and chargeback datasets. Second, the 5i guidance means that manufacturers must use class of trade definitions enumerating what “retail community pharmacy” is and is not. This is more problematic than it sounds especially when one considers mixed-use pharmacies such as 340B contract pharmacies, specialty pharmacies with a retail locations, home health care, chain pharmacies located within a hospital, etc. Maintaining granular, accurate and up-to-date class of trade master data across retail and non-retail segments poses organizational and compliance challenges.

For these reasons, manufacturers are beginning to use aggregated 867 data to support the 5i threshold test. 867 datasets are transmitted to manufacturers from their wholesalers and distributors usually on a daily or weekly basis, showing downstream customers purchasing their products across retail and non-retail channels. The benefit of using 867 for the 5i calculation is that a larger universe of units can be applied to the threshold, making the test more accurate and defensible. While 867 data offers advantages, there are nuances and data-redaction challenges that require domain knowledge and data science expertise to overcome.

As the leading life sciences channel data aggregator and analytics provider, IntegriChain has mobilized to help customers implement a monthly RCP channel mix report covering more than 80 classes of trade across more than 500,000 points of care. Customers can use either aggregated or enriched versions of the 867 data in accordance with their business rules and legal interpretations. IntegriChain delivers the reports via our private cloud or as a data extract to a secured site.

I’m happy to discuss this topic with manufacturers on how they can use their data or how IntegriChain datasets can help you to comply with the 5i regulatory requirement. Contact us with your questions. 


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About the Author

Dave Weiss

Dave Weiss

Vice President, Industry Solutions

David Weiss, a software industry veteran, is charged with leading IntegriChain’s effort to provide pre-sales business consulting to life sciences manufacturers in the areas of needs assessment, analytics design, and value engineering. Prior to IntegriChain, David led the solutions and product marketing organizations at Model N, SAP, and IDS as well as spent five years as a management consultant for PWC, KPMG, and Knowledgent.